Landmark Development Corp. v. Chambers Corp.

752 F.2d 369, 40 Fed. R. Serv. 2d 1300, 1985 U.S. App. LEXIS 28604
CourtCourt of Appeals for the Ninth Circuit
DecidedJanuary 18, 1985
DocketNos. 83-6026, 83-6032
StatusPublished
Cited by21 cases

This text of 752 F.2d 369 (Landmark Development Corp. v. Chambers Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Landmark Development Corp. v. Chambers Corp., 752 F.2d 369, 40 Fed. R. Serv. 2d 1300, 1985 U.S. App. LEXIS 28604 (9th Cir. 1985).

Opinion

PER CURIAM:

This is an appeal from the district court’s grant of summary judgment for defendant on an antitrust claim and for plaintiffs on a [371]*371counterclaim for fraud and breach of contract. We affirm.

Chambers Corporation manufactures kitchen stoves and ovens. Serv-Well Furniture Company, a California retail and wholesale applicance store, has purchased Chambers products since 1975 from Schreiber, Chambers’ only authorized distributor in Southern California.

Serv-Well believed other dealers were receiving Chambers products from Schreiber at a lower price. It devised a scheme whereby Landmark Development Corp., a paper corporation founded by officers of Serv-Well, would purchase large quantities of goods directly from Chambers by falsely claiming the goods were not intended for resale but for installation by Landmark in modular houses on the Alaska North Slope. Landmark obtained two train carloads of Chambers’ products and diverted them to Serv-Well who resold them to retailers in Schreiber’s exclusive territory.

When Chambers learned of the diversion, it informed Landmark that it would sell Landmark no more goods absent a satisfactory explanation. When it received no explanation, Chambers terminated shipments to Landmark.

Landmark and Serv-Well then filed this suit, alleging Chambers’ refusal to sell to Landmark was a per se violation of section 1 of the Sherman Act, 15 U.S.C. § 1 (1982). The complaint alleged that Chambers had conspired with its distributors, Schreiber and R & K Distributors, Inc. (Chambers’ only distributor in Northern California), to refuse to deal with Landmark and ServWell as part of a plan to restrict competition and maintain retail prices. Chambers counterclaimed for fraud, breach of contract, interference with contractual relations, and breach of implied covenant of good faith and fair dealing.

Both sides moved for summary judgment. The district court granted summary judgment for Chambers on the complaint and for Landmark and Serv-Well on the counterclaims.

I.

Landmark and Serv-Well assert Chambers and Schreiber conspired to terminate them in order to eliminate price competition — a per se violation of the antitrust laws. Chambers moved for summary judgment on the ground that its decision to refuse to sell to Landmark was a unilateral one, motivated by Landmark’s deceptive conduct and Chambers’ adherence to a system of exclusive regional distributorships.

Chambers offered detailed statements of its sales manager and a consistent pattern of marketing and warranty servicing requirements to demonstrate the exclusivity of its distributorship system. In response Landmark and Serv-Well rely on a provision in Chambers’ contract with Schreiber stating Schreiber could sell outside its “primary” territory. As Schreiber’s chief sales executive explained, however, this clause merely indicated that Chambers did not enforce its exclusive distribution system contractually. The uncontradicted evidence established that Chambers did enforce such a system through a course of dealing. Moreover, the record established that Serv-Well’s vice-president knew of Chambers’ exclusive distributorship agreement with Schreiber — he admitted he fabricated the story that Chambers would use the goods in Alaska because he knew Alaska was outside Schreiber’s territory.

Landmark’s fraud in purchasing products purportedly for its own use in Alaska and reselling them to dealers in Schreiber’s exclusive territory was a legitimate business reason for Chambers’ refusal to sell more of its product to Landmark. The undisputed proof of this legitimate business reason was sufficient to preclude an inference of a vertical price-maintenance conspiracy from the refusal to sell to Landmark alone, and to impose upon plaintiffs the burden of advancing additional specific evidence of such a conspiracy. “Once allegations of a conspiracy have been rebutted by probative evidence showing alternative, legitimate business reasons for the defendant’s conduct, to avoid summary judgment the plaintiff must come forward with spe[372]*372cific factual support for its allegations.” Program Engineering, Inc. v. Triangle Publications, Inc., 634 F.2d 1188, 1195 (9th Cir.1980). See also First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 280, 88 S.Ct. 1575, 1588, 20 L.Ed.2d 569 (1968); Blair Foods, Inc. v. Ranchers Cotton Oil, 610 F.2d 665, 672 (9th Cir.1980).

The Supreme Court recently described the kind of specific factual support required to bar summary judgment in these circumstances. More is required than proof of termination of a dealer following competitor complaints:

There must be evidence that tends to exclude the possibility that the manufacturer and nonterminated distributors were acting independently____ [T]he antitrust plaintiff should present direct or circumstantial evidence that reasonably tends to prove that the manufacturer and others “had a conscious commitment to a common scheme designed to achieve an unlawful objective.”

Monsanto Co. v. Spray-Rite Service Co., — U.S. —, —, 104 S.Ct. 1464, 1471, 79 L.Ed.2d 775 (1984), quoting Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 111 (3d Cir.1980). See also Filco v. Amana Refrigeration, Inc., 709 F.2d 1257, 1263 (9th Cir.1983).

Plaintiffs rely upon an exchange of letters between Schreiber and Chambers in which Schreiber thanked Chambers for sending a representative to visit' Schreiber’s dealers with a Schreiber representative after the Landmark diversion for the purpose of “turning around the Chambers situation in Southern California;” and upon evidence that Schreiber received many complaints from its dealers after the diversion. As the district court said:

This evidence, taken in context, merely shows Chambers’ concern that the merchandise which Serv-Well acquired through misrepresentation was disrupting Chambers’ marketing system in Southern California, and that Chambers wished to assure Schreiber that it did not intend these consequences.

In light of the strong legitimate business motivation for Chambers’ conduct, such evidence is too “highly ambiguous” to justify an inference of an agreement to fix prices, particularly since it would not be inconsistent with the antitrust laws for Schreiber to request Chambers to honor and enforce the exclusive territorial distributorship. See JBL Enterprises, Inc. v. Jhirmack Enterprises, Inc., 698 F.2d 1011, 1018 (9th Cir. 1983); A.H. Cox & Co. v. Star Machinery Co., 653 F.2d 1302, 1306-07 (9th Cir.1981); Golden Gate Acceptance Corp. v. General Motors Corp.,

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Bluebook (online)
752 F.2d 369, 40 Fed. R. Serv. 2d 1300, 1985 U.S. App. LEXIS 28604, Counsel Stack Legal Research, https://law.counselstack.com/opinion/landmark-development-corp-v-chambers-corp-ca9-1985.